Tomato Growers Love the New U.S./Mexico Deal. That's the Problem
The consumer always seems to be on the outside looking in. The recent U.S-Mexico agreement on tomato trade is a good example. U.S tomato growers will benefit from it. Mexican tomato growers will benefit. And consumers will pay for it.
Yearly Mexican exports of more than $2 billion worth of tomatoes to the United States will no longer face anti-dumping charges of 17.5 percent tariff after the Commerce Department and Mexican growers struck a deal to set minimum prices and an inspection process on the fruit from Mexico.
Both a price floor and a time-wasting, bureaucratic inspection regime will drive up the prices consumers pay for tomatoes. But as usual, consumers weren’t at the table and governments always put their interest last.
U.S tomato growers pressed hard for the dirigiste policy and will be the big winner from it. The price they can charge consumers for specialty tomatoes will increase. The price of organic tomatoes will rise by 40 percent over the price of conventional ones.
The deal will also increase the number of exports that will be subject to U.S border inspections, which tomato importers say will create a bottleneck at the border for tomatoes and other goods. This non-tariff barrier will cause a ripple effect, damaging not just the U.S tomato market but many other industries that trade with Mexicans.
Downstream producers such as pesta and sauce makers will also suffer from the deal, as the price for their basic input goes up. Consumers of tomatoes will also likely end up bearing most of that cost.
The deal was triggered by an anti-dumping charge levied by the Commerce Department. But isn’t dumping just another way of saying offering consumers a bargain? If Mexican producers want to sell their product at a below-market price, why should American consumers object? If the sandwich shop around the corner decides to bring down its price, how would you react? Would you say ‘uh oh’ I better make my own sandwiches - including baking the bread? Or would you just buy the sandwich at a bargain rate and consider yourself ahead? If you are like most people, you would choose the latter, and simply eat the low-price sandwich.
Unfortunately, consumers aren’t in the room when the trade decisions are made. Business lobbying is intense, and the companies’ donations to political parties and candidates are enormous. The average consumer can’t match that, so they are left out in the cold.
The skewing of public policy on behalf of producers actually stems from the fact that as individuals we seem to advance as producers. We may consume a thousand different goods and services. But the one we produce is what matters to us. Tomato farmers simply care more about getting the highest possible price than tomato consumers care about getting the best possible deal.
But the oligopolistic policies that favour producers hurt us more, when taken as a whole. And when the price of tomatoes goes up, the poor and single parents get hit hardest, because their tight budgets include a higher food content.
This skewing of the process to the disadvantage of consumers also works to the disadvantage of society as a whole. We have actually advanced over the centuries primarily as consumers. We live far better - with good more plentiful, medical care better, and housing more widely available - not because our wages and salaries have increased, but because we are far more efficient at producing - to meet consumer needs - and because greater profit potential attracts more capital. That consumer-driven process has actually helped to drive up wages and salaries. It has eliminated out-dated jobs, and spawned new ones .
If we want to maximize our potential growth in the future, we must do it the same way as we did in the past - by advancing our interests as consumers, not by standing aside while business interests impose trade restrictions on the economy.
